TIDMBOOT
RNS Number : 4822L
Boot(Henry) PLC
13 September 2021
13 September 2021
HENRY BOOT PLC
('Henry Boot', the 'Company' or the 'Group')
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHSED 30 JUNE 2021
Henry Boot PLC, a Company engaged in land promotion, property
investment and development, and construction, announces its
unaudited results for the period ended 30 June 2021. Ticker:
BOOT.L: Main market premium listing: FTSE: Real Estate Investment
and Services.
HIGHLIGHTS
-- Revenue of GBP129.0m (June 2020: GBP108.7m) increased 18.7%,
as demand increased across our three key markets
-- Profit before tax of GBP23.1m (June 2020: GBP7.2m) increased
by 220.8%, ahead of Board expectations, driven by the industrial
property market performing strongly and delivering positive capital
returns through disposal of investment property, revaluation gains
and returns from Joint Ventures contributing a combined GBP5.8m
-- Increased ROCE(1) of 6.3% (June 2020: 2.1%) +4.2% for the six
months to 30 June 2021 and EPS grew significantly to 14.1p (June
2020: 4.1p) up 243.9%
-- Actively investing in our three key markets, with a total of
GBP54.9m invested in new opportunities across the Group, including
GBP11.5m of post period purchases
-- NAV(2) per share grew to 256p (December 2020: 235p), an
increase of 8.9%, due to retained earnings and actuarial gains on
the defined benefit pension scheme
-- Balance sheet remains robust, with Net Debt(3) of GBP13.0m as
at 30 June 2021 (December 2020: Net Cash GBP27.0m) after strategic
investments made in the period
-- Declaring a 2.42p interim dividend (June 2020: 2.20p), an
increase of 10.0%, reflecting the Group's strong operational
performance and in line with our progressive dividend policy
-- Against a backdrop of strong demand within our key markets we
have made excellent progress in our evolved strategy and towards
our medium-term growth and return targets
-- Land promotion business sold 2,288 plots (December 2020:
2,000). The land bank has now increased to 92,253 plots (December
2020: 88,070), including 13,273 (December 2020: 15,421) plots with
planning permission which are held at the lower of cost or net
realisable value and, therefore, do not benefit from valuation
gains
-- Committed programme materially stepped up to GBP444m (HB
share: GBP181m) - 60% pre-sold or pre-let. Led by over 1 million sq
ft of industrial and logistics (69% pre-sold or pre-let). Strong
GBP1.4bn development pipeline (HB share - GBP1.1bn) with 72% in
industrial and logistics
-- Stonebridge Homes on track with its annual sales target,
securing 85% of the annual target in H1, supported by a buoyant
housing market. The total owned and controlled land bank is now
1,125 units
-- Construction business performing ahead of expectations,
securing over 100% of its 2021 order book (68% is public sector) in
the first half and 80% also secured for 2022
-- Good start to the second half, with a full order book and
forward sales in land, development and housebuilding, as well as,
launching our Net Zero Carbon Framework and establishing a
Responsible Business Committee
(1) Return on Capital Employed is an alternative performance
measure (APM) and is defined as operating profit/average total
assets less current liabilities
(2) Net Asset Value (NAV) per share is an APM and is defined
using the statutory measures net assets/ordinary share capital
(3) Net (debt)/cash is an APM and is reconciled to statutory
measures in note 14
Commenting on the results, Chief Executive Officer Tim Roberts
said:
"The business has performed well, responding to growing demand
within our key markets. Whilst we expect profit to be weighted to
the first half, the cadence of our activity will remain high, so we
will continue to make excellent progress on our clear strategic
targets. This will position us well for sustainable growth in the
future".
For further information, please contact:
Henry Boot PLC
Tim Roberts, Chief Executive Officer
Darren Littlewood, Group Finance Director
Daniel Boot, Group Communications Manager
Tel: 0114 255 5444
www.henryboot.co.uk
Numis Securities Limited
Joint Corporate Broker
Garry Levin/George Fry
Tel: 020 7260 1000
Peel Hunt LLP
Joint Corporate Broker
Charles Batten/Harry Nicholas
Tel: 020 7418 8900
Hudson Sandler LLP
Financial PR
Nick Lyon/Wendy Baker
Tel: 020 7796 4133
About Henry Boot PLC
Henry Boot PLC (BOOT.L) was established 135 years ago and is one
of the UK's leading and longest standing land promotion, property
investment and development, and construction group of companies.
Based in Sheffield, the Group comprises the following three
segments:
Land Promotion:
Hallam Land Management Limited
Property Investment & Development:
HBD (Henry Boot Developments Limited) , Stonebridge Homes
Limited
Construction:
Henry Boot Construction Limited , Banner Plant Limited , Road
Link (A69) Limited
The Group possesses a high-quality strategic land portfolio, a
proven reputation in the property development market for creating
places with purpose, backed by a substantial investment property
portfolio and an expanding, jointly owned, housebuilding business.
It has a construction specialism in both the public and private
sectors, a plant hire business, and generates strong cash flows
from its PFI contract, Road Link (A69) Limited.
www.henryboot.co.uk
CEO REVIEW
Highlights
In the first half of 2021, Henry Boot has performed strong and
continued to secure attractive opportunities for future growth
within our three key markets of industrial and logistics,
residential and urban development. The Group has achieved a profit
before tax of GBP23.1m (June 2020: GBP7.2m), which was supported by
the recovery in demand across our operations and in particular,
driven by strong demand from both investors and occupiers in the
industrial and logistics market. We have been actively investing in
our key markets, with a total of GBP54.9m invested (including
GBP11.5m in Q3 21), in line with our strategic ambitions. The
Company's strong financial position remains intact, with a robust
balance sheet and net debt of only GBP13.0m, and NAV per share
increasing to 256p, as a result of both retained earnings and
actuarial gains on our defined benefit pension scheme.
In land promotion, Hallam Land Management (HLM) has traded well,
selling 2,288 plots in the six months to June 2021 compared to
2,000 in the previous 12 months to December 2020, against the
backdrop of a resilient housing market, where housebuilder demand
for land remains buoyant. In H1 2021, HLM invested GBP6.6m, growing
its land bank to 17,357 acres (December 2020: 16,607), which has
the potential to deliver 92,253 residential plots in the long term.
This includes 13,273 plots which already have the benefit of
planning permission but, in line with our accounting policy, are
held at the lower of cost or net realisable value, and, therefore,
any increase in value created from securing planning permission
will only be recognised on disposal.
Henry Boot Developments (HBD), our property investment and
development business, completed on schemes with a total Gross
Development Value (GDV) of GBP44m (HBD share: GBP37m), with 100% of
these either sold or let. During 2021, we have materially stepped
up our development business, investing a total of GBP34.4m
(including GBP11.5m in Q3 21) in new opportunities, which includes
the GBP110m GDV build-to-rent (BTR) project in Summerhill,
Birmingham and a large industrial site in Rainham (GDV GBP90m)
purchased in a joint venture (JV) with Barings Fund. Overall, our
committed schemes grew to GBP444m GDV (HBD share GBP181m) and our
development pipeline has been maintained at GBP1.4bn (HBD share
GBP1.1bn), 72% of which is in industrial and logistics. Notably, on
the back of strong demand and investor appetite for industrial
space, we have committed to deliver over 1 million sq ft of
industrial and logistics space.
Our investment portfolio (including investment property held in
JVs) has grown to GBP106m (December 2020: GBP92m) mainly through
acquisitions but also by valuation gains of GBP3.4m. With total
returns over six months of 6.7% and rent collection at 96%, we have
outperformed our benchmarks.
Our jointly owned housebuilder, Stonebridge Homes (SBH), has
secured 85% of its 2021 sales target in a buoyant housing market,
achieving an average of 0.90 sales per week per outlet due to high
demand, which has been underpinned by low interest rates and good
mortgage availability. The total owned and controlled land bank is
now 1,125 plots (December 2020: 1,119). The growth of plots with
either detailed or outline planning consents, which totals 700
plots (December 2020: 657) has once again experienced delays due to
the slow conversion of sites through the planning system, reducing
our ability to commence work on site, although we hope to progress
a number of sites through planning in H2. Whilst the sites SBH has
acquired have kept its total land bank topped up, we anticipate
increasing this position in H2 as SBH has several sites progressing
through the legal process.
The Group's construction segment continues to perform ahead of
our expectations, supported by the recovery in the UK construction
market. Henry Boot Construction (HBC) performed strongly and is
trading ahead of budget, whilst also securing over 100% of its
order book for 2021 and 80% of 2022. Banner Plant (BP) is also
trading ahead of budget and seeing demand for plant hire increase
in line with the recovery of the construction market.
Dividend
The Board has declared an interim dividend of 2.42p (June 2020:
2.20p) for H1 2021, an increase of 10.0%, which reflects our
progressive dividend policy, the Group's strong operational
performance and the Board's confidence in the outlook for the
Group. This will be paid on 15 October 2021 to shareholders on the
register at the close of business on 24 September 2021.
Strategy
At the start of 2021 we set out our medium-term strategy. The
Group's main focus is to grow the business, by increasing capital
employed by over 40% to GBP500m, in our three key markets. At the
same time, we believe we can continue to generate a return on
average capital employed (ROCE) of 10-15% over the medium term,
whilst maintaining a progressive dividend policy. Our markets are
currently strong, and they also retain their long-term attractions.
Only six months into 2021 we have made excellent progress towards
our medium-term targets.
Particularly, HBD has materially grown its share of the
committed development programme to GBP181m (December 2020: GBP85m)
and we shall continue to manage risk by ensuring that the majority
of our programme is pre-let or pre-sold. It is likely that our
commitments will increase in H2, as we are promoting a number of
additional schemes which means we are well ahead of our plan for
HBD to complete on average GBP200m of developments per annum.
We have seen encouraging demand for our strategic land, with
sales of 2,288 plots in H1 2021 already. Whilst transactions this
year are likely to be heavily weighted to H1 2021, HLM are very
much on track to grow sales to 3,500 units on average per annum.
HLM has also created an additional team so that the large South
East region is effectively split into two to improve coverage.
Whilst demand from customers for the premium houses that SBH
build has been very strong, our ambition to grow units sold to 600
has been hampered by the slow planning process, and a very
competitive market for buying land. However, we still expect to see
expansion of the business next year and have identified
opportunities to increase our land bank in H2. We have also
acquired our second site in the North East and expect to be selling
from two regions next year. Our ambitions to scale up this business
remain on track.
The investment portfolio has grown to GBP106m, (GBP12m being our
share of investment property held in JVs) and with a range of
developments that we could potentially retain, even if we are
selective on new acquisitions - as the investment market proves to
be ever more competitive in the areas we are focusing on, we have a
clear plan to get to our target of GBP150m.
The construction business secured and began works on a major
GBP42.5m urban development scheme in the city centre of Sheffield,
increasing its activities in our three key markets. With our order
book effectively full for this year and 80% already secured for
2022, we are well ahead of our target to secure a minimum of 65% at
the start of each year. Public sector work remains our focus,
accounting for 68% of the 2021 order book.
Overall, we remain very well placed for future growth. Despite
committing to nearly GBP100m of development during the period, we
have replenished our pipeline and it remains at GBP1.4bn GDV (HB
share: GBP1.1bn). On land promotion, plots controlled have
increased to 92,253 (for comparison five years ago they were at
59,499), which is now larger than many national housebuilders. SBH,
despite experiencing planning delays, still has 700 plots with
either detailed or outline planning consent, and a total land bank
based on one year forward sales of approximately 4.5 years.
On wider objectives, our Executive Committee is developing into
a high performing senior leadership team, and whilst we will miss
Simon Carr and Giles Boot, the new MDs Tony Shaw (HBC) and Jonathan
Fisher (BP) are already contributing. I am particularly pleased
with progress we have made in relation to our Net Zero Carbon (NZC)
Framework and the formation of a Responsible Business Committee. I
remain convinced that the private sector has to act on the
challenges of climate change and being at the forefront will also
create sustainability and value to our business.
Responsible Business
Earlier this year we launched 135 Henry Boot, the first phase of
our Responsible Business Strategy (RB Strategy) and a strategic
framework centred around three long-term initiatives:
1. Our Pathway to NZC and enhancing our environmental stewardship;
2. Our new Equality, Diversity, and Inclusion (EDI) strategy; and
3. Our Community Partnership Plan (CCP) to provide funds, time,
resources, and expertise to support our community partners.
We have launched our policy and have made good progress across
all three of our initiatives. In line with our roadmap, our CPP is
progressing as planned and we have developed our EDI strategy to
create a fair, accessible, diverse and inclusive working
environment.
Following this, we also launched our NZC Framework. The Group
recognise that the built environment contributes around 40% of
greenhouse gas emissions and whilst the Group's carbon emissions
have been decreasing since 2013, we acknowledge the importance of
continuing to reduce our environmental impact. The first phase of
the Framework (2021-2025) will guide Henry Boot to deliver
short-term reduction measures for directly controlled emissions
(Scopes 1 and 2). From 2026, the Group will continue to accelerate
its decarbonisation programme to reach its target of NZC for all
direct emissions by 2030. We have also committed to responsibly
offset any residual emissions produced by commercial activity
through the funding of accredited carbon-offsetting schemes.
To support our ESG commitments and ensure they are truly
embedded into the Group's operations, we formed in June a
Responsible Business Committee, which is chaired by Non-executive
Director Peter Mawson. This Committee gives oversight and guidance
to the delivery of our RB Strategy, whilst ensuring there is
collaboration and input from the Board on all of our ESG activity
and ambitions.
We will now turn our focus to the second phase in the 135 Henry
Boot strategy, namely the development of our RB Strategy, which
launches in January 2022.
Outlook
Our focus during H1 has been to meet the growing demand in the
industrial & logistics, and residential markets. It is these
two, of our three key markets, which have driven the strength of
results in the period. The outlook for these markets, both in the
short and long-term is very encouraging.
That is why we continue to grow our land bank within HLM - now
with a potential of 92,253 plots - and are in a good position to
convert the 13,273 plots with planning into sales. HLM is now
concentrating on building up sales for 2022, and with demand from
housebuilders strong, and our portfolio prime, not surprisingly
with 1,311 plots unconditionally secured, they have made a good
start.
Similarly, HBD has materially increased industrial development
so we are committed to over 1 million sq ft, 70% of which is
pre-let or pre-sold with high levels of occupier interest in the
rest. As we let more, we will look to draw down projects from our
predominantly industrial development pipeline. We are also seeing
early signs of a recovery in urban development, driven more by the
major provincial cities than London. We shall remain selective on
urban developments and in the short term are focused on quality BTR
and build to sell schemes, but in the medium term we will continue
to promote office schemes in targeted centres such as Manchester,
as we believe cities will adjust to what will become a more hybrid
and agile working environment. Our aim over H2, and into next year,
is to expand our committed pipeline all the time managing risk by a
blend of pre-lets, forward sales and JVs.
We have taken more than our fair share of the growth in the
construction industry which effectively means HBC's order book for
this and next year is full. We will concentrate on delivering this
order book and will be selectively looking for work for 2023.
The Group's operations have seen an increase in build cost and a
shortage of materials in the UK construction industry, which has
resulted in longer lead times. To mitigate our exposure to this
situation, we have implemented measures such as securing supplies
at an early stage and adding protective clauses in construction
contracts. With the added advantage of sale prices increasing, we
have currently been able to deal with the situation effectively but
are alert to the challenges we could face in the future.
Finally, our balance sheet remains rock solid and net debt at
GBP13.0m is low so we have capacity to fund our strategic growth
ambitions, and whilst we are not immune to the heightened
competition for talented people in our industry, our team have
shown high levels of engagement during this challenging period. I
want to thank them all for their remarkable efforts, but also, I am
confident that they are up for the next stage of our journey. We
have made a good start to the second half and are well placed to
build on the progress made so far this year and on our strategic
priorities for the longer term.
Tim Roberts
Chief Executive Officer
13 September 2021
BUSINESS REVIEW
Land Promotion
HLM has delivered a strong performance in H1, achieving an
operating profit of GBP14.8m (June 2020: GBP11.1m) from selling
2,288 plots (H1 2020: 2,000) at an average profit per plot of
GBP7,679 (December 2020: GBP6,456). UK greenfield land values
increased by 2.6% in H1 2021 according to Savills Research, with
growth of 1.7% in Q2 2021, the strongest quarterly increase in land
values since 2014. A strong housing market has underpinned robust
demand for land with increased competition for sites as
housebuilders have invested to match ongoing demand for new
homes.
In the first half of the year, HLM sold plots at various
locations including, Cranbrook (315 plots), Burton upon Trent (950
plots), Market Harborough (118 plots), Stratford upon Avon (200
plots), Burdiehouse (92 plots) and Bathgate (88 plots). The land
bank has also been replenished after securing a further 750 acres
of land in locations such as: Tamworth, Ashford, Milton Keynes,
Tonbridge, Crossways, Harrogate and Dullatur, with the potential
for around 6,471 plots, subject to planning.
In relation to other major schemes, three years on from the
original consent at Didcot, the 2,170 plot scheme, received a fresh
resolution for outline planning consent and are now working up
technical design details before disposal. At Eastern Green,
Coventry, having secured planning in November 2020, the 2,400 plot
and 37 acres of commercial development site is progressing but, at
the moment it is subject to Judicial Review. The aim is to respond
to this challenge, work to clear it, and dispose of a first phase
next year. Furthermore, at Swindon (1,000 plots) planning consent
has just been secured following signing of the S106. Additionally,
the final land parcels were secured at HLM's Tamworth project where
we have a live planning application for 1,540 plots.
At the end of June, HLM benefited from 13,273 plots (December
2020: 15,421) with extant planning consent (or Resolution to Grant
subject to S106). As our strategic land portfolio is held as
inventory, our accounting policy requires these assets to be held
at the lower of cost or net realisable value. In accordance with
this policy, no uplift in value can be recognised within our
accounts relating to any of the 13,273 plots over which planning
permission has been secured. Any increase in value created from
securing planning permission over these assets will, therefore,
only be recognised on disposal.
Additionally, there are a further 8,263 plots (December 2020:
8,312) the subject of planning applications, with a further c.
3,000 plots expected to be submitted in H2, and it has 70,717 plots
(December 2020: 64,337) in its future potential portfolio, with the
total portfolio growing to 92,253 (December 2020: 88,070). Of the
total portfolio 8,805 plots are owned freehold with the balance of
83,448 secured through Planning Promotion Agreements and Options to
purchase.
Residential Land Plots
With Permission In planning Future Total
---------------------------------------------------------------------
b/f Granted Sold c/f
--------------- ------------------ --------------- --------------- --------------- ---------------
2021 15,421 140 (2,288) 13,273 8,263 70,717 92,253
2020 14,713 2,708 (2,000) 15,421 8,312 64,337 88,070
2019 16,489 1,651 (3,427) 14,713 10,665 51,766 77,144
2018 18,529 1,533 (3,573) 16,489 11,929 44,051 72,469
2017 16,417 4,281 (2,169) 18,529 7,982 40,844 67,355
--------------- ------------------ --------------- --------------- ----------------- --------------- ---------------
HLM enters H2 having achieved this year's sales target and will
now focus on securing sales for 2022 and the medium term. In this
regard, HLM already has a total of 1,311 plots unconditionally
exchanged for completion in 2022/23 at Bridport to BDW and Vistry
(760 plots), Worchester to Taylor Wimpey and Redrow (450 plots) and
Bathgate to Taylor Wimpey (101 plots). Finally, with the ambition
to invest more in the South HLM has split its South East region in
two and created another team in the southern part of the
country.
Residential Land Plots - Regional
Split
Region Plots
----------------
Scotland 9,845
----------------
North 8,116
----------------
North Midlands 20,739
----------------
South Midlands 19,605
----------------
South 7,089
----------------
South East 4,853
----------------
South West 22,006
----------------
Totals 92,253
----------------
Property Investment and Development
Property Investment and Development delivered a combined
operating profit of GBP8.2m (June 2020: GBPnil). According to the
CBRE UK Monthly Index, commercial property values increased by 2.5%
in H1 2021. Industrial continued to be the only sector to deliver
positive capital returns over the six-month period. During Q2 2021,
there was record industrial take-up of more than 15 million sq ft,
over 12% higher than the previous record quarter in Q3 2020 (units
above 100,000 sq ft). Ready to occupy space has fallen to a new low
of 9.4 million sq ft, with the UK vacancy rate now standing at just
2.1%.
HBD completed on developments with a GDV of GBP44m (HBD share:
GBP37m), which includes GBP30m of committed industrial and
logistics (Aver and Mountpark) and GBP7m of Urban Residential
schemes (Skipton phase 1 of 2) during 2021. The committed programme
has materially grown to GBP444m GDV (HBD share: GBP181m), 60% of
which is pre-let or pre-sold and if excluding the new Urban
Residential development Setl (a premium 101 apartment scheme at the
edge of Birmingham's Jewellery Quarter) it further increases to 73%
pre-let or presold. Further additions to the programme starting in
Q3 21 include two new industrial and logistic schemes at -
Southend, a speculative 75,000 sq ft development and the forward
funded New Horizon, Nottingham, for a further 426,000 sq ft of
industrial space. Kampus, the 536-unit build-to-rent (BTR) scheme
in Manchester, has begun completing in sections, with overall
completion of the building set for the end of the year. The scheme
has already started to receive encouraging letting interest.
Included within the committed programme is GBP122m GDV and over
1 million sq ft of industrial and logistics assets, where 70% is
either pre-let or pre-sold. This includes four multi-unit schemes
which are being developed speculatively: Preston East, Luton,
Southend and Enfield. Interest in these units is very encouraging,
with the anticipation that the Group will be able to report on a
number of lettings by the year end.
Committed Programme
Share of
GDV GDV Commercial Residential
Scheme (GBPm) (GBPm) (000 sq ft) (units) Status
------------------------------- -------- --------- ------------- ------------ ---------------
Industrial
Wakefield Hub, Plot 6 42 21 260 - Pre-let
Preston East 8 4 67 - Speculative
Enfield, Montagu 406 22 11 56 - Speculative
Wakefield Hub, Kitwave 7 4 65 - Pre-let
Luton 14 14 82 - Speculative
Pool, MKM 4 4 15 - Pre-let
Southend 11 11 75 - Speculative
Nottingham, New Horizon 53 53 426 - Forward funded
161 122 1,046 -
-------- --------- ------------- ------------
Residential
Manchester, Kampus 216 11 44 536 Pre-sold
Birmingham, Setl 32 32 - 101 Speculative
248 43 44 637
-------- --------- ------------- ------------
Land and other
Skipton 7 7 - 184 Pre-sold
Aberdeen, Bridge of Don 12 1 - 420 PPIP secured
Aberdeen, Cloverhill 16 8 - 536 PPIP secured
35 16 - 1,140
-------- --------- ------------- ------------
Total for year 444 181 1,090 1,777
------------------------------- -------- --------- ------------- ------------
% sold or pre-let (incl Setl) 80% 60%
% sold or pre-let (excl Setl) 87% 73%
During 2021, HBD has acquired new development opportunities with
a total GDV of GBP180m. This included the BTR scheme at Summerhill,
Birmingham (GBP110m GDV), as well as, extending the Group's
flagship industrial and logistics development at Markham Vale by a
further 750,000 sq ft (GBP32m GDV). Since the half year,
acquisitions have also been made at Welwyn Garden City (GBP20m
GDV), which is set to deliver 70,000 sq ft of industrial warehouse
space, as well as a 20-acre industrial site in Rainham, London
(GBP18m GDV HBD Share), which has the potential for around 370,000
sq ft of employment use. Rainham has been acquired in a 20:80 JV
with Barings Fund.
After making key acquisitions, HBD's short to medium-term
development pipeline has a total GDV of GBP1.4bn (HBD share -
GBP1.1bn). All of these opportunities sit within the Company's
three key markets of industrial & logistics (72%), urban
residential (17%) and urban commercial (11%). The immediate focus
on the pipeline will be to:
-- Obtain planning consents for up to 662,000 sq ft of
industrial and logistics at Wakefield Hub, 260,000 sq ft of which
is already pre-let, where works are set to commence on site in
H2;
-- Submit a detailed planning application at New Horizon,
Nottingham for 426,000 sq ft following the exchange of a forward
funding agreement last month;
-- Submit outline planning for 750,000 sq ft of new industrial
and logistics space at Markham Vale; and
-- Obtain planning for a specialist healthcare residential
facility at The Chocolate Works in York.
The value of the investment portfolio (including share of
investment properties held in JVs) has increased from GBP92m to
GBP106m. This GBP14m increase includes the acquisition of two
industrial investments at Skelmersdale (GBP4.8m) and City Court,
Manchester (GBP5.7m), valuation gains of GBP3.4m and the sale of a
food store in Huyton for GBP6.1m which generated a profit on
disposal of GBP1.3m. Rent collection for H1 2021 stands at 96%
against an industry average of 80% (source: Remit Consulting), with
the total investment property return of 6.7%, outperforming the
CBRE monthly index (5.4%). Occupancy has increased to 88% (December
2020: 84%) and the weighted average unexpired lease term is now
11.1 years.
In H1 2021, SBH have sold 58 units (36 private / 22 social)
(June 2020: 24), at an average selling price for private units of
GBP487k (December 2020: GBP368k) and have secured a further 44
units for completion in the second half of the year, achieving an
average of 0.90 sales per week per outlet. The housing market once
again saw strong demand, with house price growth of 6.7% in H1
2021, according to HM Land Registry. We have seen pricing levels
around 5% above budget, although most of this will be offset by
cost price inflation we are currently experiencing. All parts of
the UK have seen an acceleration in house price growth in 2021,
especially Yorkshire and Humberside and the North West, which were
the strongest performing English regions.
The total SBH owned and controlled land bank is now 1,125 units
(December 2020: 1,119 units). The land bank has continued to
experience delays in the planning system, which has been seen
nationally with an 11% decrease in the number of residential
planning applications granted in England in the 12 months to March
2021 (Source: ONS). Out of the total land bank, 700 plots (December
2020: 657 plots) have either detailed or outline planning consents.
This equates to a land bank of approximately 4.5 years, based on a
one-year rolling forward forecast sales target.
The focus for SBH will now turn to securing its 2021 remaining
sales target, progressing sites in the land bank through the
planning system, as well as building sales for 2022, which is 20%
secured and after acquiring a second site (c.100-units) in the
North East of England in August, with the aim of selling houses in
two regions next year. Despite planning delays, SBH remains on
track with the business's growth aspirations.
Construction
The Group's construction segment is trading ahead of Board
expectations after achieving an operating profit of GBP4.3m (June
2020: GBP0.8m). UK construction activity continued to recover, with
output increasing by 5.9% in H1 2021, largely driven by
infrastructure. Monthly output in June 2021 was only 0.3% below the
February 2020 pre-COVID-19 level with new work 2.1% below this
level, while repair and maintenance were 3.1% above.
HBC have performed strongly in the first half of 2021, securing
over 100% of this year's order book (68% in public sector). The
Glass Works in Barnsley, a GBP90m urban development was
successfully completed in June 2021, with client fit out works
progressing in advance of a staggered centre opening later in the
year. In H1, HBC has also won and commenced work on a GBP42.5m
urban development scheme, Heart of the City, for Sheffield City
Council and Queensberry Development Management to create a
mixed-use leisure facility and a seven-storey NZC office building.
Additionally, works on the GBP40m BTR residential scheme, Kangaroo
Works commenced on site in April 2021 and are set to complete in
Spring 2023.
HBC sit on ten public sector frameworks and are currently
working on six schemes with a total contract value of GBP37m. The
Group will continue to actively renew and bid for frameworks across
the public sector.
Lastly, HBC has also secured an GBP8m residential housing scheme
of 30 units in Clipstone, Mansfield, which will commence on site
H2. After having a strong first half, HBC remains committed to
delivering this year's order book and its 2022 order book, which is
currently already 80% secured.
BP is performing ahead of budget, having also benefited from the
recovery in construction activity. Live contract count increased by
37% to 3,843 (June 2020: 2,413), after a drive to increase customer
density around the depots and a big focus on business development.
Road Link (A69) is marginally ahead of Board expectations, as
lockdown eases and traffic levels recover, however, the business is
not yet back up to the levels of 2019.
FINANCIAL REVIEW
Consolidated statement of comprehensive income
Revenue for the period increased to GBP129.0m (30 June 2020:
GBP108.7m). H1 2020 was impacted by the Group's initial response to
the COVID-19 pandemic, including significant disruption to activity
in Q2 of 2020. As concerns over the pandemic have subsided,
activity and transaction levels have begun to normalise across all
of our operations.
Gross profit was 52.8% higher at GBP35.3m (30 June 2020:
GBP23.1m). This was supported by strong land promotion sales,
growth in property transaction levels and the recovery in
construction activities.
Administrative expenses increased by GBP0.4m (30 June 2020:
decreased GBP0.3m). H1 2020 included a one-off goodwill impairment
of GBP1.8m relating to the Group's social housing business, and
while discretionary spend continues to be carefully considered this
is offset by the repayment of all furlough monies in the period.
The Group also reimbursed the 20% reduction in the CEO and Group
Finance Director's salaries in 2021 to reflect the position that
everyone at Henry Boot experienced in receiving 100% of their
salaries whilst at work or on furlough.
Pension costs increased to GBP4.1m (30 June 2020: GBP2.2m) and
include one-off closure costs of the Group's defined benefit
pension scheme to future accrual of GBP2.1m, reducing the Group's
risk exposure to future fluctuations.
Fair value of investment properties increased by GBP2.1m (30
June 2020: decrease GBP2.1m) while profits on sale of investment
properties were GBP1.2m (30 June 2020: GBPnil), both a result of
favourable market conditions in our chosen markets. The Group's
share of profit of joint ventures and associates of GBP2.5m (30
June 2020: GBP2.1m) reflects the increasing amount of property
development activities undertaken with our partners. This resulted
in profit from operations of GBP23.1m (30 June 2020: GBP7.4m).
The resultant profit before tax was GBP23.1m (30 June 2020:
GBP7.2m), reflecting a strong recovery given the ongoing challenges
of the pandemic, with earnings per share of 14.1p (30 June 2020:
4.1p).
Return on capital employed
Higher operating profit in the period saw an increased return on
capital employed (ROCE) of 6.3% over a six-month period (30 June
2020: 2.1%). Over a 12-month period we continue to believe a target
return of 10-15% is appropriate for our current operating
model.
Finance and gearing
Net financing costs were GBP0.1m (30 June 2020: GBP0.2m)
reflecting continued low interest rates and the Group's prudent
debt levels.
At 30 June 2021, net debt was GBP13.0m (31 December 2020: net
cash of GBP17.0m). The Group established a positive cash position
by disposing of non-core retail assets in 2019 and has since
continued to redeploy capital back into our three key markets,
including during H1 2021.
Gearing levels have increased to 3.8% (30 June 2020: GBPnil) and
remain below our optimal operating range of between 10% and 20% as
we cautiously manage our risk levels in a recovering market.
Cash flows
Operating cash inflows before movements in working capital were
GBP16.8m (30 June 2020: GBP9.8m).
Working capital requirements have increased in line with trading
activity levels, including transactions on deferred payment terms
and from investment in inventory, resulting in working capital
outflows of GBP41.4m (30 June 2020: GBP12.2m inflow) which, in
turn, meant that operations utilised funds of GBP24.6m (30 June
2020: generated GBP22.0m). After interest paid of GBP0.3m (30 June
2020: GBP0.4m) and tax paid of GBP1.7m (30 June 2020: GBP4.4m) net
cash outflows from operating activities were GBP26.6m (30 June
2020: GBP17.2m).
Including net property investment of GBP8.4m (30 June 2020:
GBP0.1m), net cash outflows from investing activities were GBP8.7m
(30 June 2020: GBP0.6m).
The final dividend for 2020 increased by 254% to GBP4.4m (30
June 2020: GBP1.7m paid July 2020) while dividends paid to
non-controlling interests reduced by 29% to GBP0.5m (30 June 2020:
GBP1.2m).
Statement of financial position
Total non-current assets were GBP160.9m (31 December 2020:
GBP133.3m). Significant movements arose as follows:
- an increase in property, plant and equipment and movements in
right-of-use assets of GBP1.5m (30 June 2020: increase GBP1.7m)
largely relates to investment in our plant hire fleet and is
supported by plant hire activity levels and pre-hire
agreements;
- an GBP11.8m increase (30 June 2020: decrease GBP0.2m) in the
value of investment properties, being acquisitions of GBP6.2m (30
June 2020: GBPnil), subsequent capital expenditure of GBP8.7m (30
June 2020: GBP2.3m) a revaluation gain of GBP2.1m (30 June 2020:
loss of GBP2.1m), and disposals of GBP5.2m (30 June 2020:
GBPnil);
- an increase in trade and other receivables of GBP13.7m to
GBP20.9m (31 December 2020: GBP7.2m) relating to deferred land sale
debtors due beyond 12 months, arising from disposals in the current
period offset by those from prior years becoming due within 12
months and, therefore, moving to current assets; and
- a decrease in deferred tax assets of GBP1.5m (30 June 2020:
GBP3.0m increase) arising from the decrease in retirement benefit
obligations relating to the Group's defined benefit pension.
Current assets were GBP2.2m higher at GBP323.5m (31 December
2020: GBP321.3m) resulting from:
- an uplift in inventories to GBP209.4m (31 December 2020:
GBP200.8m) mainly resulting from the acquisition of a
'build-to-rent' opportunity in Birmingham, as well as replenishment
of strategic land investments;
- a decrease in contract assets to GBP8.5m (31 December 2020:
GBP13.3m) as we concluded existing property developments
contracts;
- higher trade and other receivables of GBP88.6m (31 December
2020: GBP65.0m) as transactional activity increases often with
deferred payment terms; and
- cash and cash equivalents which were GBP25.2m lower at
GBP16.9m (31 December 2020: GBP42.1m) as the Group began to
redeploy cash and facilities back into operational assets.
Total liabilities rose to GBP143.8m (31 December 2020:
GBP141.1m) with the most significant changes arising from:
- trade and other payables, including contract liabilities,
decreased GBP2.9m to GBP77.3m (31 December 2020: GBP80.2m);
- borrowings, including lease liabilities, increased to GBP29.9m
(31 December 2020: GBP15.1m) as the Group looks to reinvest debt
into cash generating assets; and
- the increase of the liabilities discount rate applied to the
defined benefit pension scheme valuation under IAS 19 to 1.9% (31
December 2020: 1.4%), reducing the value of scheme liabilities and
resulting in a decreased deficit of GBP23.4m (31 December 2020:
GBP36.4m).
Retained earnings, along with the decreased pension deficit, saw
net assets increase to GBP340.6m (31 December 2020: GBP313.5m) with
the net asset value per share increasing by 8.9% to 256p (31
December 2020: 235p).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
for the half year ended 30 June 2021
Half year Half year Year
ended ended ended
30 June 30 June 31 December
2021 2020 Restated(1) 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------------------------- --------- ---------------- -----------
Revenue 128,959 108,714 222,411
Cost of sales (93,691) (85,580) (181,944)
--------------------------------------------------------- --------- ---------------- -----------
Gross profit 35,268 23,134 40,467
Administrative expenses (13,888) (13,478) (28,791)
Pensions expense (4,132) (2,200) (4,552)
17,248 7,456 7,124
Increase/(decrease) in fair value of investment
properties 2,081 (2,131) 1,266
Profit/(loss) on sale of investment properties 1,248 8 (97)
Share of profit of joint ventures and associates 2,496 2,057 1,756
Profit on disposal of joint ventures and subsidiaries - - 7,426
--------------------------------------------------------- --------- ---------------- -----------
Operating profit 23,073 7,390 17,475
Finance income 599 351 721
Finance costs (531) (559) (1,117)
Profit before tax 23,141 7,182 17,079
Tax (3,151) (1,341) (3,354)
--------------------------------------------------------- --------- ---------------- -----------
Profit for the period from continuing operations 19,990 5,841 13,725
--------------------------------------------------------- --------- ---------------- -----------
Other comprehensive expense not being reclassified to profit
or loss in subsequent periods:
Revaluation of Group occupied property (144) (525) (651)
Actuarial gain/(loss) on defined benefit pension
scheme 12,820 (15,243) (15,713)
Deferred tax on actuarial (gain)/loss (1,436) 3,189 3,089
Total other comprehensive expense not being reclassified
to profit or loss in subsequent periods 11,240 (12,579) (13,275)
--------------------------------------------------------- --------- ---------------- -----------
Total comprehensive income for the period 31,230 (6,738) 450
--------------------------------------------------------- --------- ---------------- -----------
Profit for the period attributable to:
Owners of the Parent Company 18,678 5,470 11,921
Non-controlling interests 1,312 371 1,804
--------------------------------------------------------- --------- ---------------- -----------
19,990 5,841 13,725
--------------------------------------------------------- --------- ---------------- -----------
Total comprehensive income attributable to:
Owners of the Parent Company 29,918 (7,109) (1,354)
Non-controlling interests 1,312 371 1,804
--------------------------------------------------------- --------- ---------------- -----------
31,230 (6,738) 450
--------------------------------------------------------- --------- ---------------- -----------
Basic earnings per ordinary share for the profit
attributable
to owners of the Parent Company during the period 14.1p 4.1p 9.0p
--------------------------------------------------------- --------- ---------------- -----------
Diluted earnings per ordinary share for the profit
attributable
to owners of the Parent Company during the period 13.9p 4.1p 8.9p
--------------------------------------------------------- --------- ---------------- -----------
(1) Share of profit of joint ventures and associates have been
reclassified into operating profit, see 'change in accounting
policies' for further details.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
as at 30 June 2021
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
---------------------------------------------------- --------- --------- -----------
Assets
Non-current assets
Intangible assets 4,116 4,957 4,318
Property, plant and equipment 25,546 21,626 23,818
Right of use assets 1,878 4,804 2,110
Investment properties 94,518 70,205 82,723
Investment in joint ventures and associates 8,139 6,491 5,840
Trade and other receivables 20,879 19,200 7,194
Deferred tax assets 5,871 7,497 7,342
---------------------------------------------------- --------- --------- -----------
160,947 134,780 133,345
---------------------------------------------------- --------- --------- -----------
Current assets
Inventories 209,415 173,834 200,789
Contract assets 8,519 10,915 13,328
Trade and other receivables 88,648 74,230 65,032
Cash and cash equivalents 16,904 58,866 42,125
323,486 317,845 321,274
---------------------------------------------------- --------- --------- -----------
Liabilities
Current liabilities
Trade and other payables 73,052 67,442 72,727
Contract liabilities 4,237 9,058 7,430
Current tax liabilities 2,596 1,425 1,129
Borrowings 27,927 3,035 2,941
Lease liabilities 631 1,519 603
Provisions 4,339 5,018 4,852
---------------------------------------------------- --------- --------- -----------
112,782 87,497 89,682
---------------------------------------------------- --------- --------- -----------
Net current assets 210,704 230,348 231,592
---------------------------------------------------- --------- --------- -----------
Non-current liabilities
Trade and other payables 4,959 6,166 2,346
Borrowings - 10,083 9,969
Lease liabilities 1,343 1,896 1,613
Retirement benefit obligations 23,389 36,171 36,445
Provisions 1,355 1,463 1,076
---------------------------------------------------- --------- --------- -----------
31,046 55,779 51,449
---------------------------------------------------- --------- --------- -----------
Net assets 340,605 309,349 313,488
---------------------------------------------------- --------- --------- -----------
Equity
Share capital 13,729 13,718 13,718
Property revaluation reserve 2,198 2,468 2,342
Retained earnings 314,509 285,075 288,514
Other reserves 6,685 6,396 6,404
Cost of shares held by ESOP trust (1,044) (561) (1,176)
---------------------------------------------------- --------- --------- -----------
Equity attributable to owners of the Parent Company 336,077 307,096 309,802
Non-controlling interests 4,528 2,253 3,686
---------------------------------------------------- --------- --------- -----------
Total equity 340,605 309,349 313,488
---------------------------------------------------- --------- --------- -----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
for the half year ended 30 June 2021
Attributable to owners of the Parent
Company
------------------------------------------------------------
Cost
of
shares
Property held Non-
Share revaluation Retained Other by ESOP controlling Total
capital reserve earnings reserves trust Total interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- ----------- -------- -------- ------- -------- ----------- --------
At 1 January 2020 13,717 2,993 293,593 6,390 (1,248) 315,445 3,041 318,486
---------------------------- -------- ----------- -------- -------- ------- -------- ----------- --------
Profit for the period - - 5,470 - - 5,470 371 5,841
Other comprehensive expense - (525) (12,054) - - (12,579) - (12,579)
---------------------------- -------- ----------- -------- -------- ------- -------- ----------- --------
Total comprehensive income - (525) (6,584) - - (7,109) 371 (6,738)
---------------------------- -------- ----------- -------- -------- ------- -------- ----------- --------
Equity dividends - - (1,734) - - (1,734) (1,159) (2,893)
Proceeds from shares issued 1 - - 6 - 7 - 7
Share-based payments - - (200) - 687 487 - 487
---------------------------- -------- ----------- -------- -------- ------- -------- ----------- --------
1 - (1,934) 6 687 (1,240) (1,159) (2,399)
---------------------------- -------- ----------- -------- -------- ------- -------- ----------- --------
At 30 June 2020 (unaudited) 13,718 2,468 285,075 6,396 (561) 307,096 2,253 309,349
---------------------------- -------- ----------- -------- -------- ------- -------- ----------- --------
At 1 January 2020 13,717 2,993 293,593 6,390 (1,248) 315,445 3,041 318,486
------------------------------------- ------ ----- -------- ----- ------- -------- ------- --------
Profit for the year - - 11,921 - - 11,921 1,804 13,725
Other comprehensive income - (651) (12,624) - - (13,275) - (13,275)
------------------------------------- ------ ----- -------- ----- ------- -------- ------- --------
Total comprehensive income - (651) (703) - - (1,354) 1,804 450
------------------------------------- ------ ----- -------- ----- ------- -------- ------- --------
Equity dividends - - (4,664) - - (4,664) (1,159) (5,823)
Proceeds from shares issued 1 - - 14 - 15 - 15
Purchase of treasury shares - - - - (615) (615) - (615)
Share-based payments - - 288 - 687 975 - 975
------------------------------------- ------ ----- -------- ----- ------- -------- ------- --------
1 - (4,376) 14 72 (4,289) (1,159) (5,448)
------------------------------------- ------ ----- -------- ----- ------- -------- ------- --------
At 31 December 2020 (audited) 13,718 2,342 288,514 6,404 (1,176) 309,802 3,686 313,488
------------------------------------- ------ ----- -------- ----- ------- -------- ------- --------
Profit for the period - - 18,678 - - 18,678 1,312 19,990
Other comprehensive expenses - (144) 11,384 - - 11,240 - 11,240
------------------------------------- ------ ----- -------- ----- ------- -------- ------- --------
Total comprehensive income/(expense) - (144) 30,062 - - 29,918 1,312 31,230
------------------------------------- ------ ----- -------- ----- ------- -------- ------- --------
Equity dividends - - (4,394) - - (4,394) (470) (4,864)
Proceeds from shares issued 11 - - 281 - 292 - 292
Share-based payments - - 327 - 132 459 - 459
------------------------------------- ------ ----- -------- ----- ------- -------- ------- --------
11 - (4,067) 281 132 (3,643) (470) (4,113)
------------------------------------- ------ ----- -------- ----- ------- -------- ------- --------
At 30 June 2021 (unaudited) 13,729 2,198 314,509 6,685 (1,044) 336,077 4,528 340,605
------------------------------------- ------ ----- -------- ----- ------- -------- ------- --------
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
for the half year ended 30 June 2021
Half year Half year Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------------------------- --------- --------- -----------
Cash flows from operating activities
Cash generated from operations (24,576) 21,961 21,136
Interest paid (345) (385) (728)
Tax paid (1,670) (4,366) (6,597)
--------------------------------------------------------- --------- --------- -----------
Net cash flows from operating activities (26,591) 17,210 13,811
--------------------------------------------------------- --------- --------- -----------
Cash flows from investing activities
Purchase of intangible assets (203) (380) (283)
Purchase of property, plant and equipment (680) (521) (924)
Purchase of investment property (14,893) (2,351) (11,962)
Purchase of investment in associate (3) - -
Proceeds on disposal of property, plant and equipment 139 70 279
Proceeds on disposal of investment properties 6,427 10 627
Proceeds on disposal of investment in joint ventures - - 2,798
Distributions received from joint ventures and
associates 200 2,200 2,200
Interest received 280 351 512
Net cash flows from investing activities (8,733) (621) (6,753)
--------------------------------------------------------- --------- --------- -----------
Cash flows from financing activities
Proceeds from shares issued 292 6 15
Purchase of treasury shares - - (615)
Decrease in borrowings - (64) (1,942)
Increase in borrowings 15,017 2,484 4,153
Principal element of lease payments (342) (1,282) (3,024)
Dividends
paid - ordinary shares (4,383) - (4,643)
- non-controlling interests (470) (1,159) (1,159)
- preference shares (11) (11) (21)
-------------------------------------------------------- --------- --------- -----------
Net cash flows from financing activities 10,103 (26) (7,236)
--------------------------------------------------------- --------- --------- -----------
Net (decrease)/increase in cash and cash equivalents (25,221) 16,563 (178)
Net cash and cash equivalents at beginning of period 42,125 42,303 42,303
--------------------------------------------------------- --------- --------- -----------
Net cash and cash equivalents at end of period 16,904 58,866 42,125
--------------------------------------------------------- --------- --------- -----------
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
for the half year ended 30 June 2020
1. GENERAL INFORMATION
The Company is a public limited company, listed on the London
Stock Exchange and incorporated and domiciled in the United
Kingdom. The address of its registered office is Banner Cross Hall,
Ecclesall Road South, Sheffield, United Kingdom, S11 9PD.
The financial information set out above does not comprise
statutory accounts within the meaning of Section 434 of the
Companies Act 2006 and is neither audited nor reviewed. The
Financial Statements for the year ended 31 December 2020, which
were prepared in accordance with International Accounting Standards
in conformity with the Companies Act 2006 and International
Reporting Standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union, have been reported
on by the Group's auditors and delivered to the Registrar of
Companies. The Independent Auditors' Report was unqualified and did
not contain any statement under Section 498 of the Companies Act
2006.
2. Basis of preparation and accounting policies
The half-yearly financial information has been prepared in
accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority and with UK adopted International
Accounting Standard IAS 34 'Interim Financial Reporting'.
The half-yearly financial information has been prepared using
the same accounting policies and methods of computation as compared
with the annual Financial Statements for the year ended 31 December
2020.
A number of other standards, amendments and interpretations
became effective from 1 January 2021, which do not have a material
impact on the Group's financial statements or accounting
policies.
Change in accounting policy
At 31 December 2020, we reclassified 'share of profit of joint
ventures and associates' into operating profit. This was to reflect
that our use of joint ventures and associates has gradually moved
such that they are now integral to our business model and underpin
our core operational business activities. For comparability
purposes, results to 30 June 2020 have been restated. There is no
overall impact on profit before tax or the balance sheet.
Going Concern
The Company meets its day-to-day working capital requirements
through a secured loan facility, which includes an overdraft
facility. In January 2020, the Group concluded negotiations with
three banking partners to put in place a GBP75m facility to replace
the GBP72m facility we had in place at 31 December 2019, along with
an accordion facility of
GBP30m, which can be called upon at the Group's request. The
renewed facilities commenced on 24 January 2020, with a renewal
date of 24 January 2023 and an option to extend the facilities by
one year, each year, for the next two years occurring on the
anniversary of the facility. The renewed facilities, on improved
terms, maintain covenants on the same basis as the previous
facilities. On 19 January 2021, the banks agreed to the Group's
request to extend the facilities to 23 January 2024.
The Directors have considered the Group's principal risk areas,
including the residual impact of the COVID-19 pandemic, that they
consider material to the assessment of going concern.
The Directors have prepared forecasts to 31 December 2022
covering base case and a severe downside scenario.
Having conducted significant stress testing at the year-end they
have further considered the outcome of our half year position and
their latest forecasts, whilst taking into account the current
trading conditions, the markets in which the Group's businesses
operate and associated credit risks together with the available
committed banking facilities and the potential mitigations that can
be taken, to protect operating profits and cash flows.
The severe downside scenario considered includes short-term
curtailment in transactional activity and percentage reductions in
other activities mirroring recent downturn experiences. This is
followed by a short to medium-term recovery, coupled with the
ability to manage future expenditure as described in the 2020
Annual Report.
As reported in the 2020 Annual Report, the most sensitive
covenant in our facilities relate to the ratio of EBIT (Earnings
Before Interest and Tax) on a 12-month rolling basis to senior
facility finance costs. Our most severe downside modelling, which
reflects a near 14% reduction in revenue and near 36% reduction in
profit before tax from our base case, demonstrate headroom over
this covenant in all covenant measurement periods, for the period
to 31 December 2022.
Their review supports the view that the Group will have adequate
resources, liquidity and available bank facilities to continue in
operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis of accounting in
preparing the half-yearly financial information
Estimates and Judgements
The preparation of half-yearly financial information requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expense. Actual results
may differ from these estimates.
In preparing these half-yearly financial statements, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the Consolidated Financial
Statements for the year ended 31 December 2020.
Goodwill
Goodwill is subjected to an impairment test at the reporting
date or when there has been an indication that the goodwill should
be impaired, any loss is recognised immediately through the
Consolidated Statement of Comprehensive Income and is not
subsequently reversed.
3. Segment information
For the purpose of the Board making strategic decisions, the
Group is currently organised into three operating segments:
Property Investment and Development; Land Promotion; and
Construction. Group overheads are not a reportable segment;
however, information about them is considered by the Board in
conjunction with the reportable segments.
Operations are carried out entirely within the United
Kingdom.
Inter-segment sales are charged at prevailing market prices.
The accounting policies of the reportable segments are the same
as the Group's accounting policies as detailed above.
Segment profit represents the profit earned by each segment
before tax and is consistent with the measure reported to the
Group's Board for the purpose of resource allocation and assessment
of segment performance.
Half year ended 30 June 2021 Unaudited
-----------------------------------------------------------------------
Property
investment
and Land Group
development promotion Construction overheads Eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ----------- --------- ------------ --------- ------------ --------
Revenue
External sales 37,396 39,536 52,027 - - 128,959
Inter-segment sales 148 - 2,646 283 (3,077) -
--------------------------------- ----------- --------- ------------ --------- ------------ --------
Total revenue 37,544 39,536 54,673 283 (3,077) 128,959
--------------------------------- ----------- --------- ------------ --------- ------------ --------
Gross Profit 8,989 17,684 8,615 7 (27) 35,268
Administrative expenses (6,573) (2,866) (4,337) (4,271) 27 (18,020)
Other operating income/(expense) 5,828 (3) - - - 5,825
--------------------------------- ----------- --------- ------------ --------- ------------ --------
Operating profit/(loss) 8,244 14,815 4,278 (4,264) - 23,073
Finance income 1,326 385 382 1,920 (3,414) 599
Finance costs (1,899) (126) (229) (1,059) 2,782 (531)
Profit/(loss) before
tax 7,671 15,074 4,431 (3,403) (632) 23,141
Tax (187) (2,865) (815) 716 - (3,151)
--------------------------------- ----------- --------- ------------ --------- ------------ --------
Profit/(loss) for the
period 7,484 12,209 3,616 (2,687) (632) 19,990
--------------------------------- ----------- --------- ------------ --------- ------------ --------
Half year ended 30 June 2020 Unaudited
-----------------------------------------------------------------------
Property
investment
and Land Group
development promotion Construction overheads Eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ----------- --------- ------------ --------- ------------ --------
Revenue
External sales 33,516 19,784 55,414 - - 108,714
Inter-segment sales 148 - 248 308 (704) -
--------------------------------- ----------- --------- ------------ --------- ------------ --------
Total revenue 33,664 19,784 55,662 308 (704) 108,714
--------------------------------- ----------- --------- ------------ --------- ------------ --------
Gross Profit 5,125 12,935 5,109 (9) (26) 23,134
Administrative expenses (5,088) (1,846) (5,879) (2,891) 26 (15,678)
Other operating income/(expense) (62) (4) - - - (66)
--------------------------------- ----------- --------- ------------ --------- ------------ --------
Operating profit/(loss) (25) 11,085 (770) (2,900) - 7,390
Finance income 715 851 435 1,795 (3,445) 351
Finance costs (1,514) (572) (356) (1,129) 3,012 (559)
Profit/(loss) before
tax (824) 11,364 (691) (2,234) (433) 7,182
Tax 357 (2,172) (256) 730 - (1,341)
--------------------------------- ----------- --------- ------------ --------- ------------ --------
Profit/(loss) for the
period (467) 9,192 (947) (1,504) (433) 5,841
--------------------------------- ----------- --------- ------------ --------- ------------ --------
Year ended 31 December 2020 Audited
-----------------------------------------------------------------------
Property
investment
and Land Group
development promotion Construction overheads Eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ----------- --------- ------------ --------- ------------ --------
Revenue
External sales 85,487 21,012 115,912 - - 222,411
Inter-segment sales 296 - 500 647 (1,443) -
--------------------------------- ----------- --------- ------------ --------- ------------ --------
Total revenue 85,783 21,012 116,412 647 (1,443) 222,411
--------------------------------- ----------- --------- ------------ --------- ------------ --------
Gross Profit 12,977 12,319 15,200 32 (61) 40,467
Administrative expenses (11,024) (4,402) (9,872) (8,106) 61 (33,343)
Other operating income/(expense) 2,929 6,247 1,175 - - 10,351
--------------------------------- ----------- --------- ------------ --------- ------------ --------
Operating profit/(loss) 4,882 14,164 6,503 (8,074) - 17,475
Finance income 4,377 212 812 11,532 (16,212) 721
Finance costs (3,638) (390) (638) (2,171) 5,720 (1,117)
Profit/(loss) before
tax 5,621 13,986 6,677 1,287 (10,492) 17,079
Tax 1,864 (2,898) (1,898) (422) - (3,354)
--------------------------------- ----------- --------- ------------ --------- ------------ --------
Profit/(loss) for the
year 7,485 11,088 4,779 865 (10,492) 13,725
--------------------------------- ----------- --------- ------------ --------- ------------ --------
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------ --------- --------- -----------
Segment assets
Property investment and development 263,820 187,260 217,863
Land promotion 156,621 158,731 151,988
Construction 37,585 37,007 32,447
Group overheads 3,632 3,265 2,854
------------------------------------ --------- --------- -----------
461,658 386,263 405,152
Unallocated assets
Deferred tax assets 5,871 7,496 7,342
Cash and cash equivalents 16,904 58,866 42,125
------------------------------------ --------- --------- -----------
Total assets 484,433 452,625 454,619
------------------------------------ --------- --------- -----------
Segment liabilities
Property investment and development 32,999 25,551 35,292
Land promotion 11,016 15,307 11,934
Construction 40,916 43,914 37,554
Group overheads 3,012 4,375 3,651
------------------------------------ --------- --------- -----------
87,943 89,147 88,431
Unallocated liabilities
Current tax liabilities 2,596 1,425 1,129
Current lease liabilities 631 1,519 603
Current borrowings 27,927 3,035 2,941
Non-current lease liabilities 1,342 1,896 1,613
Non-current borrowings - 10,083 9,969
Retirement benefit obligations 23,389 36,171 36,445
------------------------------------ --------- --------- -----------
Total liabilities 143,828 143,276 141,131
------------------------------------ --------- --------- -----------
Total net assets 340,605 309,349 313,488
------------------------------------ --------- --------- -----------
4. REVENUE
The Group's revenue is derived from contracts with customers. In
the following table, revenue is disaggregated by primary activity,
being the Group's operating segments and timing of revenue
recognition:
Timing of revenue Timing of revenue
recognition recognition
------------------- -------------------
30 June 30 June
2021 2020
Unaudited At a point Over Unaudited At a point Over
Activity in the United Kingdom GBP'000 in time time GBP'000 in time time
----------- ------ ---------- ----------- ------
Construction contracts:
- Construction 38,796 - 38,796 40,933 - 40,933
- Property investment and
development 4,095 - 4,095 10,854 - 10,854
Sale of land and properties:
- Property investment and
development 6,980 6,980 - 13,935 13,935 -
- House builder unit sales 23,504 23,504 - 9,284 9,284 -
- Land promotion 39,455 39,455 - 19,701 19,701 -
PFI concession 4,886 4,886 - 5,691 5,691 -
Revenue from contracts with
customers 117,716 74,825 42,891 100,398 48,611 51,787
------------------------------- ---------- ----------- ------ ---------- ----------- ------
Plant and equipment hire 8,345 6,613
Investment property rental
income 2,620 1,620
Other rental income - property
development 197 -
Other rental income - land
promotion 81 83
------------------------------- ---------- ----------- ------ ---------- ----------- ------
128,959 108,714
------------------------------- ---------- ----------- ------ ---------- ----------- ------
5. Earnings per ordinary share
Earnings per ordinary share is calculated on the weighted
average number of shares in issue. Diluted earnings per ordinary
share is calculated on the weighted average number of shares in
issue adjusted for the effects of any dilutive potential ordinary
shares.
6. Dividends
Half year Half year Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------------------------ --------- --------- -----------
Amounts recognised as distributions to equity holders
in period:
Preference dividend on cumulative preference shares 11 11 21
Interim dividend for the year ended 31 December
2020 of 2.20p per share (2019: 3.70p) - - 2,920
Final dividend for the year ended 31 December 2020
of 3.30p per share (2019: 1.30p) 4,383 1,723 1,723
------------------------------------------------------ --------- --------- -----------
4,394 1,734 4,664
------------------------------------------------------ --------- --------- -----------
An interim dividend amounting to GBP3,214,000 (2020:
GBP2,919,000) will be paid on 15 October 2021 to shareholders whose
names are on the register at the close of business on 24 September
2021. The proposed interim dividend has not been approved at the
date of the Consolidated Statement of Financial Position and so has
not been included as a liability in these Financial Statements.
7. Tax
Half year Half year Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------------------------------- --------- --------- -----------
Current tax:
UK corporation tax on profits for the period 3,136 1,046 2,824
Adjustment in respect of earlier periods (21) 65 245
-------------------------------------------------- --------- --------- -----------
Total current tax 3,115 1,111 3,069
-------------------------------------------------- --------- --------- -----------
Deferred tax:
Origination and reversal of temporary differences 36 230 285
Total deferred tax 36 230 285
-------------------------------------------------- --------- --------- -----------
Total tax 3,151 1,341 3,354
-------------------------------------------------- --------- --------- -----------
Corporation tax is calculated at 19% (31 December 2020: 19%) of
the estimated assessable profit for the period being management's
estimate of the weighted average corporation tax rate for the
period. The Group's effective rate of tax of 14% is lower than the
standard rate of corporation tax due to profits from joint ventures
shown net of tax and the utilisation of unrecognised brought
forward losses offsetting fair value increases.
On 10 June 2021, a new statutory corporation tax rate was
enacted into law increasing the tax rate to 25% with effect from
April 2023. Deferred tax balances at the period end have,
therefore, been measured at 25% (31 December 2020: 19%), being the
rate expected to be applicable at the date the actual tax will
arise.
8. Investment properties
Investment
Completed property
investment under
property construction Total
GBP'000 GBP'000 GBP'000
------------------------------------------------------ ----------- ------------- --------
Fair value
At 1 January 2020 61,764 8,238 70,002
Subsequent expenditure on investment property 52 2,269 2,321
Capitalised letting fees - 30 30
Amortisation of capitalised letting fees (15) - (15)
Disposals (2) - (2)
(Decrease)/increase in fair value in period (2,596) 465 (2,131)
At 30 June 2020 (unaudited) 59,203 11,002 70,205
------------------------------------------------------ ----------- ------------- --------
Adjustment in respect of tenant incentives 441 - 441
Market value at 30 June 2020 59,644 11,002 70,646
------------------------------------------------------ ----------- ------------- --------
Fair value
At 1 January 2020 61,764 8,238 70,002
Subsequent expenditure on investment property 193 11,633 11,826
Capitalised letting fees 90 46 136
Amortisation of capitalised letting fees (30) - (30)
Disposals (8) (714) (722)
Transfer from inventory 245 - 245
Transfer from investment property under construction 17,040 (17,040) -
(Decrease)/increase in fair value in period (564) 1,830 1,266
------------------------------------------------------ ----------- ------------- --------
At 31 December 2020 (audited) 78,730 3,993 82,723
Direct acquisitions of investment property 6,178 - 6,178
Subsequent expenditure on investment property 5,638 2,950 8,588
Capitalised letting fees 126 - 126
Disposals (5,178) - (5,178)
Increase in fair value in period 2,081 - 2,081
At 30 June 2021 (unaudited) 87,575 6,943 94,518
------------------------------------------------------ ----------- ------------- --------
Adjustment in respect of tenant incentives 893 - 893
Market value at 30 June 2021 88,468 6,943 95,411
------------------------------------------------------ ----------- ------------- --------
At 30 June 2021, the Group had entered into contractual
commitments for the acquisition and repair of investment property
amounting to GBPnil (31 December 2020: GBP310,000).
9. Borrowings
Half year Half year Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------ --------- --------- -----------
Bank loans 24,986 10,177 9,969
Government loans 2,941 2,941 2,941
------------------ --------- --------- -----------
27,927 13,118 12,910
------------------ --------- --------- -----------
Lease liabilities 1,974 3,415 2,216
29,901 16,533 15,126
------------------ --------- --------- -----------
Movements in borrowings are analysed as follows:
GBP'000
------------------------------- -------
At 1 January 2021 15,126
Secured bank loans 15,017
New leases 65
Repayment of lease liabilities (311)
At 30 June 2021 29,901
------------------------------- -------
Bank loans include the Group's revolving loan facility which
runs to January 2024 and is drawn for durations of up to six months
and the Stonebridge Homes facility of GBP10m (fully drawn) that is
repayable in January 2022.
10. Provisions for liabilities and charges
Since 31 December 2020, the following movements on provisions
for liabilities and charges have occurred:
-- The road maintenance provision represents management's best estimate
of the Group's liability under a five-year rolling programme for
the maintenance of the Group's PFI asset. During the period GBP1,060,000
has been utilised and additional provisions of GBP352,000 have
been made, all of which were due to normal operating procedures.
-- The Land promotion provision represents management's best estimate
of the Group's liability to provide infrastructure and service
obligations, which remain with the Group following the disposal
of land. During the period, GBP458,000 has been utilised and additional
provisions of GBP932,000 have been made.
11. Defined benefit pension scheme
The main financial assumptions used in the valuation of the
liabilities of the scheme under IAS 19 are:
30 June 30 June 31 December
2021 2020 2020
% % %
----------------------------------------------- ------- ------- -----------
Retail Prices Index (RPI) 3.10 2.80 2.80
Consumer Prices Index (CPI) 2.50 2.00 2.20
Pensionable salary increases n/a(1) 1.00 1.00
Rate in increase to pensions in payment liable
for Limited Price Indexation (LPI) 2.50 2.00 2.20
Revaluation of deferred pensions 2.50 2.00 2.20
Liabilities discount rate 1.90 1.50 1.40
----------------------------------------------- ------- ------- -----------
(1) The Group's defined benefit pension scheme closed to future
accrual on 18 March 2021 with associated costs of GBP2.1m.
Amounts recognised in the Consolidated Statement of
Comprehensive Income in respect of the scheme are as follows:
Half year Half year Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------------------------------- --------- --------- -----------
Service cost:
Current service cost 180 438 795
Ongoing scheme expenses 241 286 576
Past service cost 2,074 - 150
Net interest expense 252 217 433
Pension Protection Fund 96 123 206
----------------------------------------------------------- --------- --------- -----------
Pension expenses recognised in profit or loss 2,843 1,064 2,160
----------------------------------------------------------- --------- --------- -----------
Remeasurement on the net defined benefit liability:
Return on plan assets (excluding amounts included
in net interest expense) (1,243) (4,715) (13,898)
Actuarial losses arising from changes in demographic
assumptions - 2,287 2,265
Actuarial (gains)/losses arising from changes
in financial assumptions (11,577) 17,671 27,346
Actuarial (gains)/losses recognised in other comprehensive
income (12,820) 15,243 15,713
----------------------------------------------------------- --------- --------- -----------
Total (9,977) 16,307 17,873
----------------------------------------------------------- --------- --------- -----------
The amount included in the Statement of Financial Position
arising from the Group's obligations in respect of the scheme is as
follows:
Half year Half year Year
Ended ended ended
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------ --------- --------- -----------
Present value of scheme obligations 222,726 226,972 235,143
Fair value of scheme assets (199,337) (190,801) (198,698)
------------------------------------ --------- --------- -----------
23,389 36,171 36,445
------------------------------------ --------- --------- -----------
12. Related party transactions
There have been no material transactions with related parties
during the period.
There have been no material changes to the related party
arrangements as reported in note 29 to the Annual Report and
Financial Statements for the year ended 31 December 2020.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
13. SHARE CAPITAL
Half year Half year Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------------------------- --------- --------- -----------
400,000 5.25% cumulative preference shares of
GBP1 each (31 December 2020: 400,000) 400 400 400
133,293,449 ordinary shares of 10p each (31 December
2020: 133,181,537) 13,329 13,318 13,318
----------------------------------------------------- --------- --------- -----------
13,729 13,718 13,718
----------------------------------------------------- --------- --------- -----------
14. Cash generated from operations
Half year Half year Year
ended ended ended
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
---------------------------------------------------- --------- --------- -----------
Profit before tax 23,141 7,182 17,079
Adjustments for:
Amortisation of PFI asset 303 321 570
Goodwill impairment 102 1,925 2,218
Depreciation of property, plant and equipment 1,756 2,144 3,585
Depreciation of right-of-use assets 300 370 987
Impairment loss on land and buildings 100 84 -
Revaluation (increase)/decrease in investment
properties (2,081) 2,131 (1,266)
Amortisation of capitalised letting fees - 15 30
Share-based payment expense 459 487 975
Pension scheme credit (236) (2,037) (2,233)
Profit on disposal of property, plant and equipment (528) (360) (939)
Loss on disposal of right-of-use assets - - 89
(Profit)/loss on disposal of investment properties (1,248) (8) 95
Gain on disposal of joint ventures - - (7,426)
Finance income (599) (351) (721)
Finance costs 531 559 1,117
Share of profit of joint ventures and associates (2,496) (2,057) (1,756)
---------------------------------------------------- --------- --------- -----------
Operating cash flows before movements in equipment
held for hire 19,504 10,405 12,404
Purchase of equipment held for hire (3,276) (1,131) (2,201)
Proceeds on disposal of equipment held for hire 617 490 1,159
---------------------------------------------------- --------- --------- -----------
Operating cash flows before movements in working
capital 16,845 9,764 11,362
Increase in inventories (8,626) (4,085) (31,285)
Decrease in contract assets 4,809 8,170 5,757
(Increase)/decrease in receivables (36,982) 14,585 39,800
Increase/(decrease) in payables 2,571 (5,655) (2,052)
Decrease in contract liabilities (3,193) (818) (2,446)
Cash generated from operations (24,576) 21,961 21,136
---------------------------------------------------- --------- --------- -----------
Net (debt)/cash is an alternative performance measure used by
the Group and comprises the following:
Analysis of net (debt)/cash:
Cash and cash equivalents 16,904 58,866 42,125
Bank overdrafts - - -
------------------------------ -------- -------- -------
Net cash and cash equivalents 16,904 58,866 42,125
Bank loans (24,986) (10,177) (9,969)
Lease liabilities (1,974) (3,415) (2,216)
Government loans (2,941) (2,941) (2,941)
Net (debt)/cash (12,997) 42,333 26,999
------------------------------ -------- -------- -------
15. GROUP RISKS AND UNCERTAINTIES
The Directors consider that the principal risks and
uncertainties which could have a material impact on the Group's
performance over the remaining six months of the 2021 financial
year remain consistent with those set out in the Strategic Report
on pages 48 to 54 of the Group's Annual Report and Financial
Statements. These risks and uncertainties include:
- Safety
- Environmental and climate change
- Economic
- People and culture
- Funding
- Cyber
- Pensions
- Construction contracts
- Property assets
- Property development
- Land sourcing
- Land demand
- Political
The Group has been affected by material shortages, price
inflation and lead times prevalent across the UK construction
industry and continues to take measures to mitigate our exposure,
this includes securing supplies at an early stage and adding
protective clauses in construction contracts.
The Directors continue to monitor the impact of COVID-19 on the
Group, considering primarily the safety and welfare of our staff as
we transition to a new normal.
The Group operates a system of internal control and risk
management in order to provide assurance that it is managing risk
while achieving our business objectives. No system can fully
eliminate risk and therefore the understanding of operational risk
is central to the management process within Henry Boot. The
long-term success of the Group depends on the continual review,
assessment and control of the key business risks it faces.
16. Approval
The issue of these statements was formally approved by a duly
appointed committee of the Board on 10 September 2021.
RESPONSIBILITY STATEMENTS OF THE DIRECTORS
The Directors confirm that these condensed interim Financial
Statements have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and that the interim management report
includes a fair review of the information required by DTR 4.2.7 and
DTR 4.2.8, namely:
-- an indication of important events that have occurred during the
first six months and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties
for the remaining six months of the financial year; and
-- material related-party transactions in the first six months and
any material changes in the related-party transactions described
in the last Annual Report.
The Directors of Henry Boot PLC are listed in the Henry Boot PLC
Annual Report for the year ended 31 December 2020. A list of
current Directors is maintained on the Henry Boot PLC Group
website: www.henryboot.co.uk .
On behalf of the Board
T A ROBERTS D L LITTLEWOOD
Director Director
13 September 2021 13 September 2021
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